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Friday, January 2, 2009

India’s first Shariah-compliant mutual fund plan cleared

BANGALORE: The Securities and Exchange Board of India has given the long-awaited nod to Taurus Mutual Fund and its joint venture partner Parsoli Corporation to set up India’s first Shariah-compliant mutual fund.

However, the open-ended fund’s launch is subject to the current economic and political climate. “It could be either later in January after Muharram or in April after the general elections,” Sareshwala said.

Taurus had filed the offer document for this fund in October 2007 in collaboration with Parsoli.

However, the regulator reportedly had some reservations on the grounds that it targeted a particular community.

The new fund will make investments only in the shares of companies that are compliant with the dictates of the Shariah, which forbids ties with companies involved in banking, alcohol, tobacco, gambling, non-halal meat or pornography.

As interest cannot be earned on investments made as per Shariah laws, the fund will not invest in debt either, explained Shariq Nisar, CEO of Bangalore-based Bearys Amanah Investments.

“We target to have assets under management of Rs 100 crores. We have set up a three-member Shariah advisory board to guide the investments,” Sareshwala said.
The Sebi decision has evoked mixed response from other mutual fund players.

According to an investment banker who did not wish to be named, some fund houses have shown an inclination to enter into the fray, there are others who aren’t.

For instance, Reliance Capital Asset Management Ltd recently got approval in Malaysia to launch a Shariah fund there. “But we have not taken a call on launching the services in India as yet,” said Sandeep Sikka who was recently appointed as the CEO of Reliance Capital Asset Management.

The biggest markets for Shariah linked financial products are the US, UK and the Middle East.

According to industry insiders, the size of the market world over for Shariah financial products is valued at around $2.5 trillion.

Independent estimates for the size of the opportunity in India is not available but there are more than 154 million Muslims in India and their savings are well into thousands of crore.

ii) Monthly or regular investment

iii) Withdrawal from EPF (KWSP) - account 1

Maximum: (n/a)

Withdrawal/Redemption: at any time (5 days notice)

Who can invest?

i) Individuals or corporations

ii) Residents or non-residents of Malaysia

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"There are no restrictions for foreign investors to access Islamic securities, bonds and unit trusts in Malaysia. Non-residents are free to invest in Malaysia in any of these products. There are also no restrictions on the repatriation of capital, profits and income earned from Malaysia."[Securities Commission Malaysia]